||Most natural cyclic peptides of pharmacological and biological importance are assembled by modular organized non-ribosomal peptide synthetases (NRPSs) in microorganisms. The carboxy terminal thioesterase (TE) domain of these NRPSs is responsible for macrocyclization of the linear peptide precursor. Recently, the excised TE domain in vitro was found to catalyze the cyclization of peptidyl-N-acetylcysteamine (peptidyl-SNAC) from solid phase peptide synthesis (SPPS) and this chemoenzymatic method was further used to efficiently generate libraries of novel products. In this study, we characterized the excised thioesterase domain (licC TE) from NRPS of lipopeptide lichenysin D, one of biosurfactants with antibacterial and antiviral activities. It was found to be one of the most active enzymes to catalyze the macrolactonization in production of this kind of biosurfactants. To explore its substrate specificity, the configuration on the β-hydroxy fatty acid was changed from R to S and all the residues were sequentially substituted with alanine except that the β-hydroxy fatty acid was replaced by β-alanine, without changing the configuration of the α-carbon. The kinetic study of licC TE towards all these substrate analogues indicated that its cyclization activity strictly requires the recognition of residues in the substrate at both the hydroxyl terminus (R configuration and the hydroxyl group of the β-hydroxy fatty acid) and the carboxyl terminus (sidechains of aspartate-5 and isoleucine-7), but tolerates changes of other residues in the middle. Moreover, it was observed in the enzymatic reaction of all this kind of excised thioesterases that the cyclic and hydrolysis products always appeared in parallel. In order to investigate whether the cyclization activity could be enhanced, the enzymatic conversion of the wild type substrate LPwt by licC TE was carried out at different pH values and temperatures, as well as in anhydrous organic solvents. On the basis of these results, it is concluded that the thioesterase licC TE possesses high catalytic efficiency and broad substrate flexibility, which can be applied to generate cyclic lipopeptides of novel activities.